Oxford Bulletin of Economics and Statistics
- Publication date:
- Nbr. 80-2, April 2018
- Nbr. 80-1, February 2018
- Nbr. 79-6, December 2017
- Nbr. 79-5, October 2017
- Nbr. 79-4, August 2017
- Nbr. 79-3, June 2017
- Nbr. 79-2, April 2017
- Nbr. 79-1, February 2017
- Nbr. 78-6, December 2016
- Nbr. 78-5, October 2016
- Nbr. 78-4, August 2016
- Nbr. 78-3, June 2016
- Nbr. 78-2, April 2016
- Nbr. 78-1, February 2016
- Nbr. 77-6, December 2015
- Nbr. 77-5, October 2015
- Nbr. 77-4, August 2015
- Nbr. 77-3, June 2015
- Nbr. 77-2, April 2015
- Nbr. 77-1, February 2015
- Data‐Driven Identification Constraints for DSGE Models
We propose imposing data‐driven identification constraints to alleviate the multimodality problem arising in the estimation of poorly identified dynamic stochastic general equilibrium models under non‐informative prior distributions. We also devise an iterative procedure based on the posterior density of the parameters for finding these constraints. An empirical application to the Smets and Wouters () model demonstrates the properties of the estimation method, and shows how the problem of multimodal posterior distributions caused by parameter redundancy is eliminated by identification constraints. Out‐of‐sample forecast comparisons as well as Bayes factors lend support to the constrained model.
- Issue Information
- Nowcasting Indian GDP
Nowcasting has become a useful tool for making timely predictions of gross domestic product (GDP) in a data‐rich environment. However, in developing economies this is more challenging due to substantial revisions in GDP data and the limited availability of predictor variables. Taking India as a leading case, we use a dynamic factor model nowcasting method to analyse these two issues. Firstly, we propose to compare nowcasts of the first release of GDP to those of the final release to assess differences in their predictability. Secondly, we expand a standard set of predictors typically used for nowcasting GDP with nominal and international series, in order to proxy the variation in missing employment and service sector variables in India. We find that the factor model improves over several benchmarks, including bridge equations, but only for the final GDP release and not for the first release. Also, the nominal and international series improve predictions over and above real series. This suggests that future studies of nowcasting in developing economies which have similar issues of data revisions and availability as India should be careful in analysing first‐ vs. final‐release GDP data, and may find that predictions are improved when additional variables from more timely international data sources are included.
- The Long‐Term Effects of Legalizing Divorce on Children
We estimate the effect of divorce legalization on the long‐term well‐being of children, by exploiting the different timing of divorce legalization across Europe. We compare the adult outcomes of cohorts raised when divorce was banned with those of cohorts raised after divorce was legalized in the same country. We also have ‘control’ countries where all cohorts were exposed (or not exposed) to legal divorce as children. We find that women who grew up under legal divorce have lower earnings and income and worse health as adults compared with women who grew up under illegal divorce. These negative effects are not found for men.
- Biases and Strategic Behaviour in Performance Evaluation: The Case of the FIFA's best soccer player award
In this paper, we study biases in performance evaluation by analysing votes for the FIFA Ballon d'Or award for best soccer player, the most prestigious award in the sport. Our findings suggest that ‘similarity’ biases are substantial, with jury members disproportionately voting for candidates from their own country, own national team, own continent and own league team. Further, we show that the impact of such biases on the total number of votes a candidate receives is fairly limited and hence is likely to affect the outcome of this competition only on rare occasions where the difference in quality between the leading candidates is small. Finally, analysing the incidence of ‘strategic voting’, we find jury members who vote for one leading candidate are more, rather than less, likely to also give points to his main competitor, as compared with neutral jury members. We discuss the implications of our findings for the design of awards, elections and performance evaluation systems in general and for the FIFA Ballon d'Or award in particular.
- Multiple Visits and Data Quality in Household Surveys
In order to increase data quality some household surveys visit the respondent households several times to estimate one measure of consumption. For example, in Ghanaian Living Standards Measurement surveys, households are visited up to 10 times over a period of 1 month. I find strong evidence for conditioning effects as a result of this approach: In the Ghanaian data the estimated level of consumption is a function of the number of prior visits, with consumption being highest in the earlier survey visits. Telescoping (perceiving events as being more recent than they are) or seasonality (first‐of‐the‐month effects) cannot explain the observed pattern. To study whether earlier or later survey visits are of higher quality, I employ a strategy based on Benford's law. Results suggest that the consumption data from earlier survey visits are of higher quality than data from later visits. The findings have implications for the value of additional visits in household surveys, and also shed light on possible measurement problems in high‐frequency panels. They add to a recent literature on measurement errors in consumption surveys (Beegle et al., , Gibson et al., ), and complement findings by Zwane et al. () regarding the effect of surveys on subsequent behaviour.
- Solving Models with Jump Discontinuities in Policy Functions
We compare global methods for solving models with jump discontinuities in the policy function. We find that differences between value function iteration (VFI) and other methods are economically significant and Euler equation errors fail to be a sufficient measure of accuracy in such models. VFI fails to accurately identify both the location and size of jump discontinuities, while the endogenous grid method (EGM) and the finite element method (FEM) are much better at approximating this class of models. We further show that combining VFI with a local interpolation step (VFI‐INT) is sufficient to obtain accurate approximations. The combination of computational speed, relatively easy implementation and adaptability make VFI‐INT especially suitable for approximating models with jump discontinuities in policy functions: while EGM is the fastest method, it is relatively complex to implement; implementation of VFI‐INT is relatively straightforward and it is much faster than FEM.
- Low Paid Employment in Britain: Estimating State‐Dependence and Stepping Stone Effects
Using 18 waves of the British Household Panel Study, this paper examines state‐dependence and stepping stone effects of low pay. The results show that both state‐dependence and stepping stone effects of low pay are present. However, there is no evidence to support a low‐pay no‐pay cycle. The introduction of the national minimum wage does not appear to have affected state‐dependence and stepping stone effects of low pay.
- Mergers Along the Global Supply Chain: Information Technologies and Routine Tasks
This paper empirically analyses how the adoption of Information Technologies (IT) has changed the organization of global supply chains. We focus on international mergers, which are a growing and important component of foreign direct investment. We use data on North–South mergers and acquisitions (M&As). We show that the effect of IT adoption on the number of vertical M&As is decreasing with the routine intensity of the industry. Our interpretation is that the IT revolution enabled new monitoring mechanisms. This allowed Northern headquarters to better monitor suppliers, especially those in less routine‐intensive industries –which were harder to monitor before.
- TIPS and the VIX: Spillovers from Financial Panic to Breakeven Inflation in an Automated, Nonlinear Modeling Framework
This paper examines the determinants of the breakeven inflation rate (BEI) on U.S. Treasury Inflation Protected Securities. After controlling for several measures of liquidity, inflation expectations and inflation uncertainty; financial fear itself (proxied with the Volatility Index or VIX) remains a primary influence on BEI. To delve into the mechanism underlying this association, the VIX is decomposed, using intraday data, into conditional variance and the variance premium capturing risk aversion. Aside from the 2008 crisis, most of the effect emanated from the variance premium. Following the crisis, indicators of bank insolvency risk gain prominence as well. Lastly, an automated nonlinear model finds convex effects of variance, and diminishing returns to insolvency risk and liquidity.
- A Cautionary Note on Estimating the Standard Error of the Gini Index of Inequality: Comment
We observe that care must be taken when using a regression‐based approach to construct a standard error for the Gini coefficient....
- A Comparison of Johansen's, Bierens’ and the Subspace Algorithm Method for Cointegration Analysis*
The methods listed in the title are compared by means of a simulation study and a real world application. The aspects compared via simulations are the performance of the tests for the cointegrating rank and the quality of the estimated cointegrating space. The subspace algorithm method, formulated...
- A Correction for Local Biasedness of the Wald and Null Wald Tests
This paper proposes a procedure to overcome the problem of small‐sample local biasedness of the Wald test of a single restriction. The new test procedure involves finding two critical values, in order to obtain the desired size and local unbiasedness. Simulation results indicate that the Wald test...
- A DYNAMIC ECONOMETRIC MODEL OF AGRICULTURAL WAGE DETERMINATION IN BANGLADESH
- A MODEL OF THE DISTRIBUTION OF PRICES1
- A Non‐parametric Examination of Capital–Skill Complementarity*
This paper uses non‐parametric kernel methods to construct observation‐specific elasticities of substitution for a balanced panel of 73 developed and developing countries to examine the capital–skill complementarity hypothesis. The exercise shows some support for capital–skill complementarity, but...
- A Note on the Distribution of BDS Statistics for a Real Exchange Rate Series
- A Note on the Power of Money‐Output Causality Tests
This study suggests that some empirical findings against money‐output causality can be the consequence of ignoring autoregressive conditional heteroskedastic (ARCH) errors. Monte Carlo results confirm that ARCH effects drastically reduce the power of the standard causality test. The maximum...
- A Note on the Theme of Too Many Instruments*
The difference and system generalized method of moments (GMM) estimators are growing in popularity. As implemented in popular software, the estimators easily generate instruments that are numerous and, in system GMM, potentially suspect. A large instrument collection overfits endogenous variables...
- A Principal Components Analysis of Common Stochastic Trends in Heterogeneous Panel Data: Some Monte Carlo Evidence
In this paper we propose a new approach based on principal components analysis to test for the number of common stochastic trends driving the non‐stationary series in a panel data set. This test has the advantage that it is also consistent when there is a mixture of I(0) and I(1) series, making it...